Local Citrus Oil Market Report
Global orange oil market and juice supply faces pressure due to declining production in Brazil and Florida, driving prices up and benefiting South African fruit growers.
The Citrus oil market and juice supply remains under pressure in the global market for several seasons now due to declining production volumes coming from major producers Brazil and Florida USA. Brazil being the industry’s largest producer, accounts for three-quarters of global orange juice exports and leads the market conditions.
Citrus greening disease and unfavourable weather conditions have been affecting Brazil’s citrus belt and led to a continuous reduction in crops and accompanying higher prices for orange oil and juice. South Africa being a minor player in the global juice and oil market, has a stronger focus on fresh fruit exports, where 70% of fruit are exported. In contrast to Brazil which processes 70-80% of its crop for juice.
Local fruit growers have been benefiting from the current situation of higher juice/oil prices as competing fruit processors are paying increasingly higher prices for fruit, with more farmers opting to take advantage of the situation in favour of higher risk associated with fresh fruit exports. As a result, the 2024 harvest season should see an increase in availability of orange oil, however prices are expected to increase further due to higher prices for paid for fruit.
Weather patterns in South Africa over the last 3 seasons have been more favourable as most regions have exited the various drought conditions experienced since 2016. The effect of El Nino remains to be seen in the northern regions, which tends to lower precipitation in the northern regions of Southern Africa.
A lack of supply and unprecedented increased demand in Europe for Terpenes/d-Limonene has seen a sharp increase in prices for orange oil derivatives, with spot pricing for terpenes well above USD 7.90/kg and Orange oil trending upwards of $12.00-14.00/kg. A stronger performing Rand is expected to offset some of these increases in the domestic citrus oil market.
In conclusion, the global citrus oil market and juice supply remain strained due to declining production in key regions like Brazil and Florida, driven by citrus greening disease and unfavorable weather. This ongoing supply pressure has led to higher prices, creating opportunities for South African growers to capitalize on the situation. While South Africa has benefited from favorable weather and increased export prices, the future remains uncertain with the potential impact of El Niño and fluctuating global demand. Despite these challenges, a stronger Rand may help mitigate some of the price increases in the domestic market.